Congress of the Philippines

Nineteenth Congress
Second Regular Session }
SENATE*

S. No. 2455

(In Substitution of S. Nos. 315, 505, 682 and 2046)

Prepared and submitted jointly by the Committees

ON National Defense and Security, Peace,
Unification and Reconciliation joint with the
Committees on Ways and Means and Finance with
Senators Zubiri, Revilla, Jr., Ejercito Estrada,
Marcos, Gatchalian, Villanueva, Legarda and
ViLLAR (M) AS authors THEREOF

AN ACT REVITALIZING AND STRENGTHENING THE

SELF-RELIANT DEFENSE POSTURE PROGRAM
AND PROMOTING THE DEVELOPMENT OF A
NATIONAL DEFENSE INDUSTRY PURSUANT
THERETO AND PROVIDING FUNDS THEREFOR

Be it enacted by the Senate and House of Representatives of

the Philippines in Congress assembled:

1 Section l. Short Title. - This Act shall be known as

2 the “Self-Reliant Defense Posture Revitahzation Act”.
3 Sec. 2. Declaration of Policy. - It shall be the policy of
4 the State to serve and protect its people and sovereignty at
5 all times. The State also recognizes the important role of a
6 self-rehant defense posture in national defense. Thus, it is
7 imperative to revitalize the country’s self-reliant defense
 1 posture program and to fully harness the potential of the
2 defense industry at a time where security threats are
3 imminent and continue to evolve.
4 Towards this end, the State shall undertake to
5 develop the defense industry and its capability to locally
6 produce advanced weaponry and equipment for its armed
7 forces through technology transfer, partnerships with and
8 incentivizing the private sector.
9 Sec. 3. Definition of Terms. - As used in this Act:
10 (a) Acquisition refers to the process of procuring
11 technologies, programs, and product support that are
12 necessary for national defense and security, in order to
13 support the armed forces of the country. It shall include
14 the acquisition of raw material, critical components, and
15 materiel;
16 (b) Allied Industries refer to various industries
17 which are part of the supply chain in the manufacture,
18 production and assembly of defense materiel;
19 (c) Countertrade refers to a form of international
20 trade whereby the supplier commits to introduce
21 investments, technology transfer, training or skills
22 upgrade, donations or related activities, including in-
23 country production, all of which wiU assist in the
24 establishment or development of local industries or
25 technical facilities or expansion of technological and
 1 industrial capabilities of the Department of National
2 Defense (DND) and the Philippines;
3 (d) Critical Components refer to components,
4 subsystems, systems, and related special tooling and test
5 equipment essential to the production, repair,
6 maintenance, operation of weapon systems or other items
7 of equipment identified as being essential to the execution
8 of any national defense and national security strategy;
9 (e) Highest Rated Bid refers to the offer with the
10 highest calculated rating based on criteria which shall
11 include but not limited to capability, quality, timeliness of
12 delivery, life cycle cost, after-sales support, transfer of
13 technology, warranty, perquisites and price;
14 (f) In-country Enterprise refers to: (1) FHipino-owned
15 enterprises engaged in the manufacturing, servicing and
16 operation of materiel in the Philippines, or (2) a joint
17 venture by a Filipino-owned enterprise together with a
18 foreign entity, or (3) foreign-owned enterprises engaged in
19 the manufacturing, servicing and operation of materiel:
20 Provided, That such foreign-owned enterprise shall locate a
21 substantial portion of their production and servicing within
22 the Philippines;
23 (g) Integrated Logistics Support refers to an
24 integrated and iterative process for developing materiel
25 and support strategy that optimizes functional support,
26 leverages existing resources, and guides the system
 1 engineering process to quantify and lower life cycle cost and
2 decrease logistics footprint, making the system easier to
3 support to be able to ensure that defense materiel,
4 personnel, goods and services are at the right place and at
5 the right time;
6 (h) Materiel refers to military technology, weapon
7 systems, arms, ammunition, combat clothing, armor,
8 vehicles, and other similar military equipment and
9 materials;
10 (i) Minimum Local Content refers to the minimum
11 percentage of intermediate goods used in the
12 manufacturing processes to be sourced from in-country
13 enterprises;
14 (j) Operating refers to the process of functioning or
15 operating of materiel or facilities, utilities and
16 appurtenances thereto which are necessary for the
17 manufacturing, servicing or operating of the materiel or its
18 components;
19 (k) Plan refers to the Investment Priorities Plan as
20 provided in Executive Order No. 226 or the “Omnibus
21 Investment Code of 1987,” as amended;
22 (1) Servicing refers to the process of maintaining,
23 repairing or overhauling materiel.
24 Sec. 4. Creation of the Office of the Undersecretary for
25 Defense Technology Research and Industry Development. -
26 The Office of the Undersecretary for Defense Technology
 1 Research and Industry Development (DTRID) shall be
2 created within the Department of National Defense (DND).
3 It shall be headed by an officer with the rank of
4 Undersecretary, assisted by an Assistant Secretary, both to
5 be appointed by the President of the Philippines.
6 Existing offices and units of the DND with similar
7 functions and responsibilities to the DTRID shall he
8 subsumed and/or merged under this office,
9 Sec. 5. Powers and Functions of the Office of the
10 Undersecretary for Defense Technology Research and
11 Industry Development. - The Office of the Undersecretary
12 for DTRID shall have the following powers and functions:
13 (a) Manage and administer a databank for analysis;
14 (b) Conduct research and development;
15 (c) Facilitate technology transfer;
16 (d) Promote the defense industry;
17 (e) Establish public-private partnerships;
18 (f) Set up domestic and foreign collahorations; and
19 (g) Recommend and advise the Secretary on policies,
20 rules, and regulations for the development of the National
21 Defense Industry and the implementation of this Act.
22 Sec. 6. Self-Reliant Defense Posture (SRDP) Program.
23 — The DND, through the Office of the Undersecretary for
24 DTRID, shall formulate and implement the SRDP program to
25 revitalize the defense industry, vigorously develop and
26 strengthen alhed industries, and address the short, medium.
 1 and long-term needs for defense materiel. The following shall
2 be the guiding principles in formulating the program:
3 (a) It shall be designed to be advantageous to in-
4 country enterprises, generate and prioritize local
5 employment, and contribute to foreign cmrency exchange
6 savings, in accordance with Section 12, Article XII of the
7 Philippine Constitution;
8 (b) It shall incentivize manufacturers to establish or
9 relocate production or assembly of materiel in the Phihppines
10 while ensuring the protection of local manufacturers and
11 assemblers against unfair competition;
12 (c) It shall promote technology transfer;
13 (d) It shall endeavor to secure the country’s sufficient
14 access to resident supply chains of materiel or critical
15 components that are vital to national security;
16 (e) It shall drive proactive research and development
17 efforts and the adoption of innovative technologies to enhance
18 the existing inventory of equipment and weapons systems;
19 (f) It shall promote active participation of local
20 innovative councils, invention societies, universities, and
21 other higher learning institutions in advancing science-based
22 industrialization and provide research grants and
23 development subsidies to program participants;
24 (g) It shall complement the Phihppine Development
25 Plan, and align with the National Security Policy and
26 Republic Act No. 10349 or the “Revised AFP Modernization
 1 Program”, with emphasis on the modernization of the
2 government arsenal, naval shipyards, military bases and
3 camps;
4 (h) It shall assess the current state of the country and
5 define developmental goals to allow the private industry time
6 to acquire the necessary expertise and technology for future
7 government request for products;
8 (i) It shall align with the objectives of Eepubhc Act
9 No. 11293 or the “Philippine Innovation Act,” particularly by
10 fostering partnerships among various stakeholders from the
11 pubhc and private sector, academe, MSMEs, research and
12 development institutions, and communities towards
13 promoting inclusive growth and improving the quality of life
14 through innovation;
15 0 It shall enumerate a comprehensive range of
16 defense materiel covered by the program, while specifying
17 materiel to be produced by the Government or govemment-
18 owned and -controlled corporations (GOCCs), those that will
19 be co-developed with private entities, and those that will be
20 wholly outsourced to private industry;
21 (k) It shall identify specific areas where prospective
22 local and foreign-owned in-coimtry enterprises can
23 participate in;
24 (1) It shall promote the export of locally made
25 materiel and the in-country enterprises to other countries;
26 and
 8

1 (m) It shall prioritize the purchase of locally made

2 materiel by national agencies, local government units, and
3 other law enforcement agencies from in-country enterprises.
4 Sec. 7. Projects under the SRDP Program. —
5 Formulation of projects under the SRDP Program shall
6 adhere to the policies set by the DTRID. All projects
7 formulated shall be subject to the approval of the
8 President.
9 (a) For projects conducted solely by the Government,
10 the lead agency or lead government-owned and -controlled
11 entity shall be primarily responsible for implementing and
12 completing the project;
13 (b) For projects conducted jointly by a government
14 agency or entity and private enterprises, both shall be
15 equally responsible for the implementation and completion
16 of the same; and
17 (c) For projects conducted solely by private entities,
18 the implementation and completion of the same shall be
19 the responsibility of said private entities.
20 The Undersecretary shall exercise supervision and
21 monitoring over the project in all instances.
22 If the materiel is one which shall be developed,
23 produced, assembled, serviced, or operated with private
24 entities or one whose development, production, assembly,
25 servicing, or operation will be wholly sourced out to the
26 private sector, the Undersecretary shall publish in two (2)
 9

1 newspapers of general circulation and on its website the

2 criteria and qualifications for participants of the project,
3 the details and mechanics of the SRDP project in question,
4 and the terms and conditions for participation in the
5 project: Provided, That participants must obtain and
6 maintain ISO 9001 certification and other applicable
7 quality certifications corresponding to particular products
8 and services such as, but not limited to, AS9100 for
9 aerospace: Provided, further. That the Undersecretary
10 shall not publish details, specifications, and such other
11 information that must he kept confidential by reason of
12 national security.
13 Sec. 8. Development of Technology and Systems to
14 Counter Unconventional Threats. — The SRDP Program
15 shall include materiel, capital equipment, spare parts and
16 accessories essential to and designed to effectively counter
17 and address chemical, biological, radiological, nuclear, and
18 cyber-attacks or incidents.
19 The DND, AFP, and all other government agencies
20 involved in responding to such attacks or incidents shall
21 enhance the capacity and capabilities of its special units
22 tasked with chemical, biological, radiological and nuclear
23 emergency response and risk mitigation by promoting
24 technology transfer, and sourcing labor and production of
25 materiel, capital equipment, spare parts or accessories,
26 locally.
 10

1 Sec. 9. Intellectual Property Office Special Lane. —

2 The Intellectual Property Office shall establish a special
3 lane to handle applications for patents, industrial designs,
4 copyrights, and similar applications involving sensitive
5 military and defense technologies, inventions, processes,
6 and softwares in order to fast-track the evaluation and
7 approval process and to ensure that confidential
8 information pertaining to such applications are properly
9 safeguarded.
10 Sec. 10. Cooperation of Government Agencies. - The
11 DTRID shall coordinate, collaborate and work with the
12 Department of Science and Technology (DOST),
13 Department of Trade and Industry (DTI), Department of
14 Transportation (DOTr), National Economic Development
15 Authority (NEDA), Department of Interior and Local
16 Government (DILG), Department of Budget and
17 Management (DBM), Department of Finance (DOF), Board
18 of Investments (BOI), Government Procurement Policy
19 Board (GPPB), and other government agencies in
20 implementing this Act.
21 These agencies are mandated to support the
22 provisions of this Act. The DBM and the GPPB are
23 mandated to strengthen the systems and procedures for
24 acquisition of materiel under this Act.
 11

1 Sec. 11. Incentives. —

2 (a) Any provision of law to the contrary
3 notwithstanding, foreign or local enterprises engaged or
4 proposing to engage in the development, manufacture,
5 assembly, servicing or operation of materiel for
6 Government may be registered with the BOI or with
7 Investment Promotion Agencies (IPAs) and may avail of
8 the incentives under R.A. 11534 or the “Corporate
9 Recovery and Tax Incentives for Enterprises Act”:
10 Provided, That such enterprises shall locate a substantial
11 portion of its development process, manufacturing,
12 assembly, or servicing in the country.
13 The development, manufacture, assembly, servicing
14 or operation of materiel shall he included in the Strategic
15 Investment Priority Plan every year by operation of law
16 after the effectivity of this Act until otherwise removed by
17 the BOI or the President: Provided, That the removal of
18 manufacturing, servicing, or operation of materiel from the
19 Plan subsequent to the effectivity of this Act shall not be
20 interpreted as a bar or restriction on the BOI from later
21 including the manufacturing, servicing or operation of
22 materiel in the Plan.
23 (b) Government financial institutions are highly
24 encouraged to support the defense and allied industries by
25 formulating and extending financial products that would
26 benefit its hastened development.
 12

1 (c) In addition to the incentives under existing laws,

2 in-country enterprises engaged in the development,
3 manufacture, assembly, servicing and operation of materiel
4 registered with the BOI and IPAs shall enjoy exemption
5 from national internal revenue taxes, value-added tax, and
6 customs duties on their importation of capital equipment,
7 raw materials, spare parts or accessories to be used in the
8 manufacture, assembly, servicing and operation of defense
9 materiel, only in cases when the same are not locally
10 available.
11 Sec. 12. Permits, Licenses and Certifications. -
12 Issuance of permits, licenses and certifications from
13 national and local government agencies shall strictly
14 adhere to the period provided for under Republic Act No.
15 11032 or the “Ease of Doing Business and Efficient
16 Government Service Delivery Act of 2018.” In addition to
17 this, government agencies and offices in charge of the
18 issuance of permits, licenses and certifications to
19 manufacture, produce, process, assemble, servicing, repair,
20 and develop materiel, ordnance, ammunitions and
21 explosives, capital equipment, spare parts and accessories,
22 are prohibited from ordering to change, renovate or modify
23 a portion of a newly built manufacturing facility if the
24 construction of such manufacturing facility had strictly
25 followed the building and construction plan submitted to
26 and approved by the concerned government agency. Such
 13

1 changes shall be made prior to the issuance of the building

2 permit and the actual construction of the facility: Provided,
3 That the concerned government agency shall review the
4 locational, building and construction plan of the facility.
5 Sec. 13. Rationalization of Defense Acquisition. -
6 (a) Notwithstanding any contrary provision of law, the
7 Secretary, on behalf of the Government, is hereby
8 authorized to enter into contracts, under such terms and
9 conditions as may be agreed upon, with any natural or
10 juridical person, for the manufacture, servicing or
11 operation of materiel or components thereof, facilities,
12 utilities and appurtenances thereto, which are necessary
13 for the manufacture, servicing or operating, production,
14 processing, assembly, repair, and development of such
15 materiel or components thereof necessary for national
16 defense: Provided, That in the exercise of such authority,
17 the Secretary shall comply with the reportorial
18 requirements under Section 19 of this Act;
19 (b) In-country enterprises participating in the
20 acquisition of materiel by the DND and its bureaus shall
21 be exempt from the Single Largest Completed Contract
22 (SLCC) requirement and the requirement of a product to
23 be used by at least two (2) foreign militaries;
24 (c) In cases where the manufacture, servicing or
25 operation of materiel or components thereof, facilities,
26 utilities and appurtenances thereto essential to national
 14

1 defense cannot be made locally and several bidders

2 participate in the public bidding, the bid submitted by
3 foreign enterprises and in-country enterprises shall be
4 evaluated based on the following criteria on price:
5 (1) If the public bidding uses the standard of lowest
6 calculated and responsive bid, bids of in-country
7 enterprises shall be considered as having a price less than
8 that proposed by foreign enterprises as long as such bids
9 shall not be more than fifteen percent (15%) in excess of
10 the bid of such foreign enterprise;
11 (2) If the public bidding uses the standard of highest
12 rated bid, bids of in-country enterprises shall be considered
13 as having met the criteria of price as long as its bid shall
14 not be more than fifteen percent (15%) in excess of the bid
15 of such foreign enterprise;
16 (3) While honoring domestic preference, the in-
17 country enterprise shall maintain the price it has
18 submitted for the bid; and
19 (4) The procuring entity shall issue a letter of credit
20 in favor of an in-country enterprise: Provided, That no
21 payment on the letter of credit shall be made until delivery
22 and acceptance of the goods as certified to by the procuring
23 entity in accordance with the delivery schedule provided
24 for in the contract have been concluded.
25 (d) In cases where the manufacture, servicing or
26 operation of materiel or components thereof, facilities.
 15

1 utilities, and appurtenances thereto essential to national

2 defense cannot be made locally, and only foreign
3 enterprises participate, the ultimate objective of the DND
4 shall be technology transfer and the acquiring of
5 knowledge for eventual local production: Provided, That
6 foreign enterprises participating pursuant to this
7 subsection shall formulate and undertake an understudy
8 program to facilitate the technology transfer and train
9 Filipino workers towards the achievement of this objective;
10 (e) In Section 13(c) and 13(d), the DND, in
11 consultation with representatives of in-country enterprises
12 and other government agencies, shall issue regulations on
13 the minimum local content for all defense-related
14 acquisitions; and
15 (f) In Section 13(c) and 13(d), Integrated Logistics
16 Support must be incorporated in all contracts concerning
17 defense-related acquisitions.
18 Sec. 14. Multi-Year Contracts. - For the purpose of
19 acquisition of materiel, notwithstanding existing laws to
20 the contrary, and subject to Section 13 of this Act, the DND
21 and its bureaus shall be authorized to enter into multi-year
22 contracts: Provided, That corresponding appropriation for
23 the ensuing fiscal years shall be included in the annual
24 General Appropriations Act (GAA) upon issuance of a
25 multi-year obligation authority by the DBM: Provided,
26 further. That the DND, in consultation with DBM, shall
 16

1 issue implementing guidelines to ensure that contracts are

2 consistent with the Revised AFP Modernization Program
3 and this Act: Provided, finally. That the DND and its
4 bureaus shall coordinate and conduct acquisition planning
5 for the implementation of multi-year contracts.
6 Sec. 15. Applicability of This Act to Uniformed
7 Services, Other Law Enforcement Agencies, and
8 Government-Owned and -Controlled Corporations
9 (GOCCs). - This Act shall be applicable to uniformed
10 services, other law enforcement agencies and GOCCs
11 procuring materiel, capital equipment, spare parts and
12 accessories such as, but not limited to, guns and its
13 accessories, ammunitions, bullet-proof vests or similar
14 protective gears, armored personnel carriers (APCs), tanks,
15 boats, ships, unmanned aerial vehicles (UAVs), aircrafts,
16 and communication equipment and software, in the
17 exercise of their functions. These agencies are the
18 Philippine National Police (PNP), Bureau of Jail
19 Management and Penology (BJMP), Bureau of Fire
20 Protection (BFP) under the Department of Interior and
21 Local Government (DILG), Philippine Coast Guard (PCG)
22 under the DOTr, the National Bureau of Investigation
23 (NBI), Bureau of Corrections (BUCOR), and the Bureau of
24 Immigration (BI) under the Department of Justice (DOJ),
25 National Mapping and Resource Information Authority
26 (NAMRIA) under the Department of Environment and
 17

1 Natural Resources (DENR), Bureau of Customs (BOC)

2 under the DOF, Philippine Drug Enforcement Agency
3 (PDEA), and other similar law enforcement agencies and
4 GOCCs, including but not limited to the Philippine
5 Aerospace Development Corporation (PADC). The head of
6 the agency concerned shall approve the procurement of
7 materiel under this Act if the total amount of the approved
8 budget for the contract (ABC) does not exceed One billion
9 pesos (Pi,000,000,000). If the ABC exceeds One billion
10 pesos (Pi,000,000,000), the approval of the President is
11 required. Procurement of products, supphes, projects and
12 services not falling under this Act shall be covered by the
13 regular process of procurement under Republic Act No.
14 9184 or the “Government Procurement Reform Act”.
15 Sec. 16. Prohibition on the Sale of Materiel to Private
16 Entities. - Materiel in the form of weapons, ammunition,
17 explosives, and weapons systems, and other similar
18 materiel, produced under the SRDP shall solely be for the
19 use of the State’s uniformed services and other law
20 enforcement agencies. Sale of materiel to private entities,
21 both natural and juridical in the Philippines, shall be
22 prohibited, unless otherwise allowed under Republic Act
23 No. 10591 or the “Comprehensive Firearms and
24 Ammunition Regulation Act”. All sales of materiel to
25 private entities allowed under this section shall be subject
26 to value added tax and other applicable taxes.
 18

1 Sec. 17. Countertrade and Offset. - Countertrade and

2 offset shall be integrated as part of the procurement policy
3 and procedures in the DND, including those of its attached
4 agencies, bureaus and offices, with respect to its purchase
5 or procurement of imported capital equipment, machinery,
6 supphes, material and services, as an added value in the
7 selection of a supplier during the procurement of goods and
8 services.
9 In order to reduce foreign exchange outflow, generate
10 local employment opportunities, and enhance technology
11 transfer to the Philippines, the Secretary of National
12 Defense, shall, as far as practicable, incorporate in each
13 agreement involving the Government the manufacturing,
14 servicing or operation of materiel, special foreign exchange
15 reduction schemes, offset, and countertrade, in-country
16 manufacture co-production, or other innovative
17 arrangements or combinations thereof.
18 Sec. 18. Promotion and Marketing Support. — The
19 Government shall promote the export of locally made
20 materiel, and the local enterprises to other countries, and
21 is encouraged to provide financial marketing support for
22 the purpose of such promotion.
23 Sec. 19. Reporting and Oversight. - The Secretary
24 shall, not later than the end of the first quarter of the
25 succeeding year, submit to the President and the Congress:
 19

1 a. An annual report on the acquisitions made under

2 this Act; and
3 b. Copies of the multi-year contracts, obligations
4 and other agreements entered into by the department and
5 its bureaus.
6 Pursuant to its constitutional duties, the executive
7 department, particularly the NEDA, the Commission on
8 Audit (COA), and the Congress shall discharge oversight
9 functions, to wit:
10 The NEDA shall conduct an annual review of the
11 status of all defense-related acquisitions exercised by the
12 Secretary, identify causes of delays, reasons for
13 bottlenecks, cost overruns, both actual and prospective,
14 and continued viability, and report to the Congress not
15 later than June 30 of each year;
16 The COA shall conduct an audit on each ongoing, and
17 completed acquisition and render a report to the Congress
18 thereon not later than June 30 of each year. There shall be
19 a Congressional Oversight Committee composed of the
20 Chairpersons of the Committee on National Defense and
21 Security of both Senate and House of Representatives who
22 shall serve as Co-chairpersons of the oversight committee,
23 the Chairpersons of the Committee on Ways and Means of
24 both Senate and House of Representatives who shall serve
25 as Co-Vice-Chairpersons, four (4) members each from the
26 Senate and the House of Representatives representing the
 20

1 majority and two (2) members each from the Senate and
2 the House of Representatives representing the minority to
3 be designated by the Senate President and Speaker of the
4 House of Representatives.
5 Sec. 20. Rule of Interpretation. - Rights and
6 obligations arising from existing contracts as of the date of
7 effectivity of this Act shall be governed by their original
8 terms and conditions or the law in force at the time such
9 rights were vested.
10 This Act shall take precedence over Republic Act No.
11 9184 or the “Government Procurement Reform Act”, or any
12 subsequent general law on procurement regarding
13 transactions subject to the requirement of public bidding.
14 The DND Secretary shall continue to serve as a member of
15 the GPPB.
16 Nothing in this Act shall be considered as exempting
17 our country from compliance with the provisions of the
18 Arms Trade Treaty.
19 Sec. 21. Implementing Rules and Regulations. -
20 Within ninety (90) days from the effectivity of this Act, the
21 DND shall formulate and promulgate rules and regulations
22 necessary for the implementation of the law.
23 Sec. 22. Appropriation. - An initial funding of One
24 billion pesos (PI,000,000,000.00) shall be included in the
25 annual appropriations of the DND for the purpose of
26 implementing this Act. The amount necessary to support
 21

1 the implementation of this Act shall be charged against the

2 respective agency’s subsequent funding and shall be
3 included in the annual GAA.
4 Sec. 23. Separability Clause. - If any provision of this
5 Act is declared unconstitutional, the remainder thereof not
6 otherwise affected shall remain in full force and effect.
7 Sec. 24. Repealing Clause. - All laws, presidential
8 decrees, executive orders, letters of instruction, and
9 administrative regulations that are inconsistent with the
10 provisions of this Act are hereby repealed, amended, or
11 modified accordingly.
12 Sec. 25. Effectivity. - This Act shall take effect after
13 fifteen (15) days following the completion of its publication
14 in the Official Gazette, or in a newspaper of general
15 circulation.
Approved,